Late Stage Capitalism
Physician, Long-Term Stock Investor with 30 Years of Experience
Never bet against Microsoft: in its history it has never been a poor capital allocator, and despite small mistakes it is an amazing corporate investor. The same holds for Google, despite criticism quoted by @firstadopter that supplying OpenAI and Anthropic with compute mortgages its future. x.comÂ
Microsoft's 50% Azure growth and prospect of positive cash flow in 2027 make the stock look bulletproof. Headcount cuts, lower Anthropic spend, a better Copilot routed to cheaper tokens, and coming proprietary chips and model usage add to the case. It should get Apple's multiple plus recognition for cybersecurity. x.com x.comÂ
Microsoft stands out for capital discipline amid the AI capex frenzy, and could swing back up while Google may trend down. Apple, with its own capital discipline, is set to scoop up cheaply whichever companies end up holding the most debt from this capex cycle. x.com x.comÂ
Microsoft's position is the most crowded among the Magnificent Seven, and fund flows are against it as funds sell those stocks to reserve cash for Anthropic's IPO. It faded despite an excellent earnings report. x.comÂ
Microsoft's OpenAI exposure is a very good reason to keep it alongside Anthropic exposure through Alphabet and Amazon. The prior thought of reducing or exiting Microsoft has given way to a tentative hold, with no plans to add for now. x.comÂ
Anthropic's S-1 and @UncleAlpha007's claim that Microsoft is growing despite a 27% headcount cut have turned the near-term tech-equity view bullish. At least a tradable rally is expected; further upside depends on Iran developments and PCE. Stay nimble. x.com x.comÂ
Microsoft's delivery delays are affecting earnings, making other sources of returns look safer now. x.comÂ
Microsoft is the hyperscaler to own because, unlike its peers, it has funded the AI buildout without issuing corporate debt. It has the largest backlog among the hyperscalers while remaining the least leveraged. x.comÂ
Microsoft's hold on enterprise software and the cloud running AI makes it one of tech's best positions to own. Fiscal Q1 revenue rose 19% on Azure and the AI stack, while operating income rose 21% and net income 32%. Grade: A. x.comÂ
Microsoft is not cheap even after a 20% drop: it fails a strict 20% margin-of-safety valuation hurdle. x.comÂ
Microsoft is probably the most entrenched software name in the market, making it the lower-risk way to bet against widespread bearishness on software. It should rebound, though the timing is unclear and beside the point; fundamentals several years out should be great. x.comÂ
